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SBA's Preston Fails to Sway Lawmakers

Lawmakers on Wednesday delved into whether the Small Business Administration is a beleaguered federal agency trying to put a quiet end to a festering seven-year issue governing how federal contacts are awarded to women-owned firms, or an entity that's truly interested in helping women get ahead in business.

That was just one of the controversial issues that arose in a hearing held by the House Small Business Committee to review the agency's progress in implementing a program designed to help women get ahead in the federal contracting game.

The SBA announced proposed rules in late December designed to ensure that a congressionally-mandated 5 percent of government contracts would go to female-owned businesses - a move that would seemingly head the issue in the right direction.

But critics slammed the plan, because the agency said that women needed extra help in getting contracts in only four out of 140 industries: intelligence, engraving and metalworking, furniture and kitchen cabinet manufacturing, and a special category of motor vehicle dealers.

Committee Chairwoman Nydia Velazquez (D-N.Y.), who had criticized the plan upon its release, said Wednesday that the SBA should "scrap the rule and go back to the drawing board."

"The SBA had seven years to get this right and you come back with this product," she scolded agency Administrator Steven Preston before a packed hearing room. "It's just amazing."

Velazquez asked Preston if he believed the proposal would increase contracts so dramatically that the 5 percent goal would be met. He replied: "We believe it will be an additional tool in the quivery but it won't be the end all in getting the agencies to meet that goal."

The plan allows federal agencies to decide if women-owned businesses are underrepresented in other industries, but first they would have to find sufficient evidence of discrimination by the government before setting aside contracts. The SBA also limited the size of any contract to $5 million for manufacturing jobs and $3 million for other work.

The agency based its proposal on a study conducted by the RAND Corp. at the SBA's request. Preston reiterated his agency's position that the plan passes constitutional muster and is scientifically accurate.

A 2000 law called the Equity in Contracting for Women Act created the Women's Procurement Program to help women more successfully compete for government work. The SBA did not implement the program while examining it for more than five years to determine how it should work. The U.S. Women's Chamber of Commerce sued the government over the SBA's lack of implementation and the court ruled that the federal government was acting unreasonably in delaying the law's enactment.

Preston was backed by witness Elizabeth Papez, a deputy assistant attorney general with the Justice Department. She said Justice saw the proposal as consistent with constitutional requirements, an issue that surfaced repeatedly throughout the hearing. For a federal program that discriminates on the basis of gender in awarding government contracts to be constitutional it must pass muster under the equal protection language of the 5th Amendment.

Preston and Papez were the only supporters of the agency's proposal during the two-panel hearing that saw a total of seven witnesses.

Meanwhile, Jennifer Brown, legal director of Legal Momentum, a legal advocacy organization dedicated to advancing the rights of women and girls, said the SBA's additional requirement in its proposal to have each agency conduct studies of discrimination in all industries would "add a completely unnecessary and debilitating requirement before any federal agency could use this program; it would require the agency to conduct on its own, additional analysis of its procurement history and to find that it had discriminated against women-owned businesses in the relevant industry."

Brown said that by grafting on additional agency obligations virtually would guarantee no women-owned business would ever benefit from the program. Her testimony was seconded by Denise Farris, a government contracting expert who owns a Kansas law firm. She testified on behalf of Women Impacting Public Policy, a bipartisan public policy group representing more than 500,00 businesses.

U.S. Women's Chamber of Commerce CEO Margot Dorfman characterized the SBA's findings as looking "more like something pulled out of a hat than the results of seven years of work and a scientific disparity study."

Beth Gloss, a manager at roofing contractor United Materials in Denver, said during the hearing that because there is no set-aside program for women-owned businesses, "heavy pressure is continually applied in our construction field to purchase from contractors where a formal set-aside program is in place. This happens even when there are women-owned contractors available and eager to do the work."

Preston, who testified that "we're presuming that a set-aside rule is the only way we're going to expand government contracts" told the Small Business blog during a break between hearing panels that other ways to reach out to women business owners were to conduct more SBA outreach, education efforts, training and greater contractor use of tech tools designed to highlight women-owned small businesses eligible to receive government contracts.

"We have hundreds of events planned and we're making a lot of progress," he said. "This particular program is not the only way and it's not the best way."

The rule is open to public comment through next month and could become effective late next year.

The issue may have repercussions this presidential election year, said Barbara Kasoff, president of Women Impacting Public Policy, in a phone interview earlier this month. "If lawmakers don't think that women aren't going to take this issue to the ballot box, they're sorely mistaken."